New Delhi: Inflation fell to a 14- month low of 4.03% for the week ended 16 June, as essential food items and some manufactured products turned cheaper, easing pressure on RBI to tighten monetary policy.
The wholesale prices-based inflation rate fell for the 10th consecutive week from the previous week level of 4.28%.
Inflation also fell due to some base effect as it stood at a high of 5.5% during the corresponding week last year.
Earlier in the week, finance minister P Chidambaram had said in London that central bank tightening the monetary policy and rupee appreciation had helped moderate inflation and more rate rises may not be needed if the trend continues.
Analysts said as inflation is closely moving to the level the Reserve Bank had targeted for the medium term, it would prompt the central bank not to resort to further tightening of its monetary stance.
Noted economist Abheek Barua, who will join HDFC Bank as senior vice-president treasury next week, said RBI’s stance would shift from hawkish to neutral in its upcoming monetary policy review, slated for July 31. “All the major rates are likely to remain stable,” he added.
RBI had targeted inflation to remain close to five per cent this fiscal and 4-4.5 per cent in the medium term.
Among major food items, pulses were cheaper by 0.2% due to improvement in their supply. The state-owned trading firms have contracted 10.38 lakh tonnes of pulses for imports till 25 June in the current fiscal. Of this, 1.87 lakh tonnes have arrived.
However, prices of some pulses like masur rose by 2%.
Prices of vegetables declined by 2.4% and those of fruits by 0.3%. However, analysts said prices would in fact rise in the coming weeks as supply is disrupted due to rains.
Eggs, meat and fish turned cheaper by 0.8%, but rice was dearer by 1%.
Prices of food products in manufactured category also declined. Imported edible oil turned less expensive by 5%, gur, sugar and khandsari fell by 2% each and rice bran oil and gingelly oil by 1% each.
However, prices of coconut oil moved up 1%.